Senior and Post-Acute Healthcare News and Topics

Catching Up Part I: Politics, Observation Stays, and Medicaid

Off the golf course (reluctantly) and back to work. Last week was full of catching up and revisiting issues and reports. As promised before I went temporarily AWOL, here’s Part I of at least two parts (maybe three) of issues that I am following.

Politics and the First Tuesday in November: The conventions are done and now the grind begins through the November election. This may be the most polarized election in decades and the price tag is certain a record breaker – approximating $1 billion. What is most interesting to me is the banter about the economy and healthcare. Being that I am an economist by training and a healthcare guy on the ground, what I see is quite different than the rhetoric on the news, reported via polls, analysts, etc. Here’s my twist on the substantive issues under debate.

The economy is stalled and the primary reason is uncertainty. Fixing uncertainty is all about changing, for the U.S. economy, the consumer’s point of view. Consumption drives economic activity (demand) and thus, businesses and suppliers will return with investment, jobs, etc. to meet the rising consumer demand. This also is true for healthcare demand which has stayed level to flat in a number of sectors as the ranks of the under and unemployed have swelled (no job, no health insurance, no healthcare). I suspect that a fair amount of healthcare demand is pent-up now, awaiting a change in economic fortunes. Granted, this is primarily elective type demand but nonetheless, business and revenue presently absent. Sadly, I also believe that a near-term rise in chronic disease is forthcoming as folks have foregone early intervention for lack of resources.

Creating “certainty” doesn’t happen via a presidential election directly unless the elected president is capable of galvanizing a vision and creating compromise. For example, tax policy. The economy is far more fluid than either party would want voters to believe. It can handle higher or lower tax rates but not “tax policy” by absenteeism. For the economy, the fiscal cliff is less about falling into the abyss and more about what is at the bottom of the cliff, if a bottom even exists. Certainty is about rational for consumers, not ideology. Only one major impediment exists to creating rational on a broader level and that is bureaucracy. Endless regulatory policy and reams of court and administrative law interpretations are anathema to certainty. Clear, straight-forward approaches that share gain and balance pain are necessary. No business person that I talk with, healthcare or other, is simple-minded enough to believe that gain in any form comes without a certain amount of pain. It is the fear of unknown pain (how much and how bad) that is keeping both consumers and producers away from the economic fray (discretion is the better part of valor).

Healthcare economics is trickier than either party chooses to admit and neither has an answer at this point. Entitlement spending is out of control and the present policy fixes described, come woefully short of changing the trajectory. Both parties are presenting band-aid solutions to a hemorrhaging wound. The only true answer is a complete overhaul of Medicare and Medicaid from benefit levels to funding mechanisms to entitlement conditions. The Ryan Roadmap came closest albeit “close” in this case is akin to getting the ball near the red zone, taking three holding penalties and then fumbling at mid-field. True, political suicide is sure to occur for anyone bold enough to take this on but failure to touch the core issues creates a certain “death by a thousand cuts” scenario. Solutions are available but unfortunately for a politician or his/her party, each is too radical to tie to re-election prospects.

Regardless of the outcome of November’s election, recovery will remain slow and stagnant without fundamental changes to how we “govern”. The prospects for recovery today are less economic and more policy weighted. Without fundamental shifts in policy, recovery stays stuck in neutral. For fans of civics lessons past, this has more to do with Congress than it does with the President. Congress controls the purse-strings and makes the laws, not the President.

Hospital Observation Stays: In healthcare today, its hard to find a more on-point issue to underpin my comments on uncertainty than hospital observation stays. Briefly, a hospital observation stay is a period of “limbo” time where a patient is typically triaged through an urgent care or emergent care setting proximal to the hospital. The triage period has determined the patient unstable to return to a non-medical or community setting, requiring observation but services beyond this point. less clear as to justify an admission and inpatient stay. Where the rub or issue is today is for Medicare patients and as most cases with Medicare policy issues, it is squarely bifurcated. From the hospital side comes the concern regarding readmission penalties applicable to certain Medicare inpatient DRGs that re-visit the hospital with another admission anytime 30 days post-discharge. The penalty for too many readmission instances in 2013 is a payment reduction of up to 1% of Medicare reimbursement. The number of applicable DRGs and the percent reduction for too many readmissions increases again for FY 2013, applied in 2014. On the post-acute side, primarily the nursing homes, is the argument that a patient not admitted to the hospital but hospitalized in an observation status nonetheless, may not/won’t qualify for a three-day prior inpatient stay and thus, won’t receive Medicare coverage for their nursing home stay. Arguably, the consumer or Medicare beneficiary and his/her family are placed in a stage of uncertainty as well and insurance and other coverages post hospitalization are jeopardized. CMS has heard the concern and their answer is to expand an outpatient Part B billing (hospital) demonstration project that would provide a safe-harbor for hospitals on the payment end, somewhat. Via a demonstration project presently under way, CMS proposed and is soliciting comments, on providing a 90% level of payment for a denied Part A claim via re-billing under the outpatient (Part B) program guidelines. At the same time, they are stating that payment would not be made for observation status claims. Payment of course is subject to medically necessary definitions, etc. Oddly, a wholly bizarre proposal. Legislatively, two bills are working their way through the House and Senate with bi-partisan support. The origin bill is H.R. 1543 known as “Improving Access to Medicare Coverage Act of 2011”. This bill would require counting all hospital time against the three-day qualifying stay criteria for Medicare coverage of nursing home care. This would re-solve the observation stay issue. Watching this issue over the past years, I’ve seen a fairly consistent increase in observation stays and the length thereof. While CMS implies that an observation stay should not last more than 24 hours, this guideline is clearly not followed and no enforcement mechanism is in-place. In fact, this issue is so pervasive in the industry that Medicare beneficiaries have resorted to court action, charging that the use of observation stays violated their rights to use their Medicare benefits for skilled nursing care, creating real financial damages. According to a recent study by Brown University, average lengths of observation stays are up by 7% and in 10% of cases reviewed, the stay is longer than 48 hours. Their findings also suggest an 88% increase (between 2007 and 2009) in stays longer than 72 hours.

Medicaid: Alas, the election will push health policy debates regarding Medicare front-and-center while the bigger immediate looming gorilla is Medicaid. Two distinct policy choices are going to get little play. The first is the current-law provisions for Medicaid expansion which will cost an estimated $650 billion over the next ten years (I think this figure from the CBO is light). The second is the Romney proposal to cut $800 billion for Medicaid funding and transition the program to a “block-grant” system. In a block grant approach, the Federal government allocates a fixed amount of dollars to a state in return for the state providing certain levels of qualified services. Typically, block grant style funding pushes more regulatory oversight back to the states and allows room for programmatic flexibility. Medicaid today is actually a hybrid block grant program as states are required to provide certain levels and programmatic criteria before the government allocates funding. My take, based on my discussions with various statehouses nationally is that the states are divided on which would work better. Not surprising, present Red states prefer the Romney approach provided sufficient regulatory relief comes as a result. Blue states tend to favor increased government funding and expansion as a means of helping the state fiscally. With more and more states taking a Managed Medicaid approach, it would seem like a ground-swell of “reform” Medicaid is brewing. I’ve said for years that Medicaid, not Medicare, is this generation’s next biggest unfunded liability and all of the studies and numbers coming from credible sources bear this out. The federal government has no means of sustaining the funding promises concurrent with the ACA expansion provisions. States have no economic means to continue to fund the current liabilities let alone, any expanded programs (with or without additional federal dollars). Providers are already loathe to see a growth in poor-paying Medicaid patients. Forget the funding equations for a moment and focus just on the access issues. How in the world can expanded Medicaid coverage be absorbed by the current level of providers even willing to take on additional Medicaid patients at below cost reimbursement levels? Many rural and urban areas lack adequate supplies of providers as it is. Adding to the ranks more Medicaid beneficiaries with existing demand will only create widening access gaps. And honestly, where will the dollars come from necessary to improve payments enough to entice providers to open their arms, clinics, offices, hospitals, etc? My take is that the Medicaid issue needs real-watching as this system is approaching melt-down and can very easily, contribute a significant drag (already is) on state economies and their recovery.

About

A Blog about post-acute, senior healthcare and general healthcare issues, federal and state policy and industry specific information. The Blog is in categories and I will try to keep it fresh and current and topic driven. Anyone with a topic question or a subject of interest, let me know as my research in health care and in senior health related issues is extensive.